TCS Q2 preview: Margins, profit seen muted QoQ; India business to stay flat

TCS is scheduled to announce its financial results for the September quarter of the financial year 2025-26 (Q2-FY26) on October 9

Tata Consultancy Services Ltd. (TCS) will open India Inc.’s second-quarter earnings season on Thursday, with analysts expecting the information technology major to report muted sequential growth.

 

The Tata Group company is scheduled to announce its financial results for the September quarter of the financial year 2025-26 (Q2-FY26) on October 9.

 

During the quarter under review, the tech major is expected to report a 2.7 per cent quarter-on-quarter (Q-o-Q) increase in revenue to ₹65,150.30 crore, according to consensus estimates compiled by Business Standard. Analysts attributed the muted topline growth to a reduced contribution from the Bharat Sanchar Nigam Ltd (BSNL) project.

 

 

TCS's bottom line will likely decline by 0.32 per cent to ₹12,719.13 crore amid heightened global uncertainty in the demand environment. On a year-on-year (Y-o-Y) basis, the net profit is expected to grow at an average of 6.8 per cent. Analysts expect total contract value to remain within the $7-$9 billion range.

 

In the previous quarter, the IT major reported a net profit of ₹12,760 crore, up 4.4 per cent sequentially. However, revenue declined by 1.6 per cent to ₹63,437 crore, a slightly sharper fall than analysts had expected.

 

Analysts said key factors to watch will include TCS’s outlook on restructuring and its business impact, trends in client discretionary spending amid rising macro volatility in the US, and commentary on cost optimisation initiatives and the banking, financial services, and insurance (BFSI) vertical.  ALSO READ | TCS cancels Q2 presser as date overlaps with Ratan Tata's death anniversary

Here's how analysts of various brokerages expect TCS to fare in Q2:

Nomura:  TCS’s revenue is expected to decline by 0.5 per cent Q-o-Q in constant currency (CC) terms, mainly due to a lower contribution from the BSNL project. The brokerage expects modest sequential growth in developed markets.

 

Earnings before interest and tax (Ebit) margin is likely to remain flat sequentially, as the reduced impact from the margin-dilutive BSNL project is expected to be offset by partial effects of salary hikes.

 

Deal wins are projected to range between $7 billion and $9 billion, excluding any large deals. Nomura said key factors to watch will include TCS’s outlook on restructuring and its business impact, along with trends in client discretionary spending amid rising macro volatility in the US.

 

Motilal Oswal:  The brokerage said TCS is expected to report revenue growth of around 1 per cent Q-o-Q in CC terms, driven by a 1 per cent rise in international business, while the India segment is likely to remain flat. The brokerage expects the BSNL project to ramp up in the third quarter.

 

Ebit margin is projected to decline by about 20 basis points sequentially, reflecting the one-month impact of wage hikes, continued talent investments, lower utilisation, and limited operating leverage. Motilal Oswal said key factors to monitor include near-term demand trends, technology spending, the performance of the banking, BFSI verticals, and deal wins. 

 

The brokerage added that while pyramid and productivity gains remain key margin levers, pricing pressure, evolving client behaviour, and the ongoing generative AI transition indicate a phase of realignment as vendors adapt their pricing and delivery models.

 

Nuvama Institutional Equities:  The IT major is expected to post revenue growth of 0.2 per cent Q-o-Q in both CC and US dollar terms. The India business is likely to remain flat, with the ramp-down of the BSNL deal completed in the previous quarter.

 

Ebit margin is projected to improve by about 20 basis points sequentially, despite the one-month impact of wage hikes. Nuvama said it will closely watch TCS's commentary on the US macro environment amid tariff-related uncertainty, as well as updates on employee restructuring.